More saving and more optimism about retiring in last quarter
Bank of Ireland Savings and Investment Index shows impact of Covid-19 on spending
Less people see the need for saving in six months’ time, according to Bank of Ireland.
Attitudes to saving rose by 6 per cent in the second quarter of this year, while there was also a significant rise in optimism around retiring, according to the latest Bank of Ireland Savings and Investment Index.
With less options for spending due to the coronavirus pandemic, the savings index rose to its second highest level since it started in 2017. The overall index, which gauges attitudes to savings and investing, increased by 6 per cent on the previous quarter, rising from 94 to 100.
However, the index also shows that attitudes are likely to shift again with less people seeing the need for saving in six months’ time, which may indicate a rise in spending as the reopening progresses.
The driver for the increase in the overall index was a further improvement in savings sentiment, with the savings index rising to 106 from 95 in the final quarter of last year.
Kevin Quinn of Bank of Ireland Investment Markets said: “Given the backdrop of the crisis, it seems intuitive that people would increase their appetite for saving and the fact that we saw a big move upwards in those who see it as a good time to save bears this out.”
In what was a very volatile period for investing with equity markets dropping by 30 per cent and recovering almost all of these losses in a matter of weeks, attitudes to investing became quite divided.
The investment index saw an increase in those saying they saw it as a good time to invest, while there was also an increase amongst those who saw it as a bad time to invest.
Investor sentiment, which had been quite muted at the start of the year, also improved with the investment index rising from 90 in the first quarter to 94 in the second.
Mr Quinn said the spike in investment market volatility that came with the Covid-19 crisis, meant short term opinion “became quite divided”.
“Many people very understandably viewed events as meaning it was a poor time to invest and held back plans,” he said.
“In contrast, almost a third of people saw opportunity amidst what turned out to be a short-lived downturn in investment markets. With the bounce in markets since late March, those who followed that viewpoint have been well rewarded.”
The most striking finding from the survey was the significant increase in the retirement optimism index which showed a 12 per cent rise, increasing from 107 in the previous quarter to 120.
Financial preparedness for retirement rose by a smaller amount from 103 to 109, whereas “comfort in retirement” rose from 111 to 131.
There was an improvement in the number of people who felt they would face a difficult time when asked about comfort in retirement, dropping from 33 per cent of people to 24 per cent.
There was also an improvement in how people felt about their financial preparedness for retirement, up to 61 per cent who felt prepared as against 57 per cent in the previous quarter.
Mr Quinn said the figures stand “in contrast” to those who are making adequate provisions for retirement.
“The shift in attitudes we are seeing about retirement was the surprise result in the survey,” he said.
“It suggests that attitudes to retiring may have shifted somewhat as a result of the experience of the lockdown period, with a greater emphasis on comfort and well-being in later years.
“Improved optimism about retirement however stands in contrast to the numbers who are making adequate provision for retirement.”